School spending per pupil in England protected to date; cuts of 7% or more possible in next parliament

26 March 2015

Overall current or day-to-day school spending in England has been remarkably well protected under the coalition government. Between 2010–11 and 2014–15, there has been a 0.6% real-terms increase in current spending per pupil, though capital spending has been cut by over one third in real-terms. Over the next parliament, current spending on schools could be squeezed harder. Although the commitments made by the three main UK parties are subtly different, they could all imply real spending per pupil falling by 7% or more between 2014–15 and 2019–20.

Other key findings on changes in education spending in England under the coalition government include:

Current school spending has been protected compared with other areas of domestic spending. The current schools budget has increased by 3% in real-terms between 2010–11 and 2014–15 (equating to a 0.6% rise in spending per pupil after accounting for growth in pupil numbers). In contrast, current public service spending has been cut by 8% in real-terms over the same period.

School spending has become more targeted on poorer pupils as a result of the pupil premium. Even in 2010–11, funding per pupil was higher amongst the most deprived primary (by 35%) and secondary schools (by 41%) compared with the least deprived ones. As a result of the pupil premium, these differences have increased to 42% and 49% in 2014–15.

Other areas of education have received larger cuts. There has been a 16% real-terms reduction in education spending for 16- to 19-year-olds and a one third real-terms cut to capital spending.

Squeezes on public sector pay have probably eased cost pressures on schools. This is likely to be an important explanation for why the school workforce has not fallen since 2010. The number of teachers has held steady at 450,000 and the number of teaching assistants has increased from 210,000 in 2010 to 240,000 by 2013.

There are likely to be significant cost pressures on schools’ spending over the next parliament:

The growth in pupil numbers is set to accelerate. Between 2016 and 2020, we expect to see a 7% rise in the school population, with the highest growth expected in London.

Costs faced by schools will be pushed up further by additional employer pension contributions for teachers and higher National Insurance contributions (due to the end of contracting out of the State Second Pensions).

Public sector earnings are expected to grow faster. The Office for Budget Responsibility (OBR) currently expects public sector pay per head to rise by about 14% between 2014–15 and 2019–20. This compares with growth of about 8% between 2009–10 and 2014–15.

Looking at the commitments made by the three main UK parties:

Labour and the Liberal Democrats have committed to protecting the age 3–19 education budget in real terms – early years, schools and 16–19 education, whilst the Conservatives have committed to protecting cash school spending per pupil.

In practice, these commitments might imply similar overall settlements for schools if spending increases are allocated equally across all areas by Labour and the Liberal Democrats (and assuming protections are only just met). This is because the projected growth in pupil numbers is currently around the same as the forecast rate of inflation.

They could all imply real-terms cuts to school spending per head of 7% between 2015–16 and 2019–20.

This increases to 9% if we account for increases in national insurance and pension contributions and to 12% if we also account for the OBR’s assumption for likely growth in public sector earnings

There are potentially bigger differences between the parties outside of schools spending. These protections might imply that Labour and the Liberal Democrats are not planning to make any further cuts to spending on 16-19 education. The Conservative have not made any commitments for education spending in England outside of the schools budget.

Luke Sibieta, Programme Director at the IFS and author of the report, commented: “School spending in England has been one of the most protected areas of public spending under the coalition government. However, it is likely to be squeezed harder in the next parliament. Schools face significant cost pressures from rising pupil numbers, increased employer pension and National Insurance contributions and potential upward pressure on wages.”

He added, “Plans announced by the Conservatives, Labour and the Liberal Democrats could all imply school spending per pupil in England falling by around 7% in real-terms over the next parliament, or by up to 12% if we account for some of the specific cost increases schools are likely to face in the next few years.”

ENDS

Notes

1. All figures relate to schools or education spending in England only.

2. From September 2015, employer contributions to the Teachers’ Pension Scheme will rise from 14.1% to 16.4%. From April 2016, the introduction of the single-tier pension will mean that it will no longer be possible to contract out of the state second pension (members of defined-benefit pension schemes have previously done so), which will increase employer National Insurance contributions (NICs) paid by schools by 3.4 percentage points (from 10.4% to 13.8%).

3. The level of economy-wide inflation is currently expected to be 9.1% between 2014–15 and 2019–20. If we account for the end of contracting out and increased employer pension contributions, we estimate that costs faced by schools will increase by 11.7% between 2014–15 and 2019–20. This increases to 16.0% if we further account for the OBR’s assumptions for likely growth in public sector earnings.